Understanding the Defendant’s Right to Withdraw and the Plaintiff’s Limitations in Opposing It
Introduction
The Delhi High Court’s recent judgment in Sultan Chand and Sons Pvt. Ltd. v. Kartik Sharma has provided crucial insights into the legal questions surrounding the withdrawal of section 8 application under arbitration and conciliation Act, 1996. This article explores whether a party that has applied for a reference under Section 8 can withdraw such an application and whether the opposing party has the right to challenge this withdrawal. The decision, rendered by a bench comprising Chief Justice Manmohan and Justice Tushar Rao Gedela, sheds light on the nature of arbitration rights and the procedural limitations faced by the opposing party.
Case Background : Sultan Chand and Sons Pvt. Ltd. v. Kartik Sharma
The case originated from a dispute between Sultan Chand and Sons Pvt. Ltd. (the Appellant) and Kartik Sharma (the Respondent). The Appellant, a publishing company, entered into a copyright sharing agreement with the Respondent for certain books, which contained an arbitration clause. However, issues arose when the Appellant was informed that the books authored by the Respondent were plagiarized, prompting the Appellant to withdraw them from the market and file a suit for damages amounting to ₹2.25 crores.
In response, the Respondent filed a criminal complaint and a suit alleging copyright violation against the Appellant. Additionally, the Respondent filed an application under Section 8 of the Arbitration and Conciliation Act, seeking reference of the disputes to arbitration. However, he later withdrew this application, prompting the Appellant to file the present appeal, challenging the withdrawal.
Legal Issues
The core legal issues in this case revolve around:
- Whether a party who applies for a reference under Section 8 can subsequently withdraw their application.
- Whether the opposite party has a legal right to object to such a withdrawal and insist on a reference to arbitration.
Court’s Analysis and Findings
The Right to Withdrawal of Section 8 Application under Arbitration Act
The Court observed that the right to seek a reference to arbitration under Section 8 of the Act is available solely to the defendant. According to Section 8, if the subject matter of the dispute falls under an arbitration agreement, the Court must refer the parties to arbitration. However, this right is not absolute; it can be waived if the defendant chooses to submit to the jurisdiction of the civil court instead of insisting on arbitration.
Quote from Judgment:
“The right to seek a reference to Arbitral Tribunal under Section 8 of the Act is a right available solely to the defendant. This right is waivable at the instance of the Respondent-Defendant, and the Respondent-Defendant has an option to submit itself to the jurisdiction of the Civil Court.”
The Court relied on precedents such as Kalpana Kothari v. Sudha Yadav (2002) and P. Anand Gajapathi Raju v. P.V.G. Raju (2000), which highlighted that while Section 8 mandates referring disputes to arbitration, the defendant’s decision to withdraw the application cannot be objected to by the plaintiff.
Opposing Party’s Right to Challenge the Withdrawal
The Appellant argued that the 2015 amendment to Section 8 made it mandatory for courts to refer disputes to arbitration once the conditions are met. However, the Court clarified that this mandate does not negate the defendant’s right to withdraw the application. The plaintiff’s insistence on arbitration is not justified when the defendant no longer seeks to arbitrate.
Quote from Judgment:
“Since the Respondent-Defendant herein has now withdrawn his application… the Appellant-Plaintiff has no legal right to oppose the withdrawal of the said I.A.36049/2024 and/or insists that the matter be referred to arbitration.”
Relevant Legal Provisions and Precedents
Section 8 of the Arbitration and Conciliation Act, 1996
Section 8 empowers a judicial authority to refer parties to arbitration when an action is brought before it concerning a matter subject to an arbitration agreement. The language is peremptory, obliging the court to refer the case to arbitration if the arbitration agreement covers the dispute.
Quote from Section 8 (post-2015 amendment):
“A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall… refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
Judicial Interpretations
The Court’s decision referenced several important judgments that have shaped the interpretation of Section 8:
- P. Anand Gajapathi Raju v. P.V.G. Raju (2000): The Supreme Court held that the language of Section 8 is mandatory, requiring courts to refer disputes to arbitration if the conditions are met.
- Kalpana Kothari v. Sudha Yadav (2002): This case clarified that the plea of estoppel cannot prevent a defendant from exercising their rights under Section 8, even if they had earlier waived them under a different provision.
- Magma Leasing and Finance Ltd. v. Potluri Madhavilata (2009): The Court reaffirmed that once the prerequisites of Section 8 are satisfied, the court must refer the parties to arbitration without any discretion.
Conclusion
The Delhi High Court’s decision in Sultan Chand and Sons Pvt. Ltd. v. Kartik Sharma clarifies critical aspects of Section 8 under the Arbitration and Conciliation Act, 1996. It confirms that:
- The right to seek arbitration under Section 8 is exclusive to the defendant, who can withdraw the application at their discretion.
- The opposing party (plaintiff) has no legal right to insist on arbitration if the defendant withdraws the application.
- The amendments to Section 8, while making arbitration a mandatory option under qualifying conditions, do not strip the defendant of the ability to choose civil jurisdiction.
This judgment is a vital reference for legal practitioners and parties involved in arbitration, as it outlines the limitations of the opposing party’s rights and underscores the defendant’s prerogative in deciding whether to arbitrate or proceed with civil litigation.
Citations
– Sultan Chand and Sons Pvt. Ltd. v. Kartik Sharma, (2024) 1184 HC.
– P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539.
– Kalpana Kothari v. Sudha Yadav, (2002) 1 SCC 203.
– Magma Leasing and Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103.
